As seen from the backpack
The Recycle tool is replacement for Trash Tool that is given by default to players. Instead of trashing item it gives player random amount of gems based on rarity, just like breaking block with hand, or if item can be bought from the store it gives 10% the price that was used to buy it from there. For example, World Lock costs 2000 gems in store but if recycled it gives only 200 gems. Recycling tool is useful in case if player has unneeded items but needs gems.
It can be obtained in two ways. Both ways support developers. First way is the hard way by earning 2500 gems via TapJoy (a mobile advertising and monetization platform) which also gives Supporter. Second way is by buying Gem Packs through In-App Purchase.
Gallery
Easter egg added by devs when trying to recycle negative number of items
World Lock recycling example showing it gives only 10% from original price